The Impact of Competition on the Price of Non-Covered Services in Long-Term Care Insurance: Evidence from Meal Ingredient Prices

Abstract

Recently, some local governments in Korea have introduced a quota system that limits the number of long-term care facilities, citing the detrimental effects of oversupply. This study analyzes the impact of competition among long-term care providers on the price of non-covered meal ingredients at the facility level. The market was delineated at the county level, with the Herfindahl-Hirschman Index (HHI), the number of care facilities, and provider density defined as indicators of competition. Data on non-covered meal ingredient prices from 5,154 care facilities were utilized for the analysis. The results indicate that as competition among care facilities intensifies, the price of non-covered meal ingredients tends to decrease. Motivated by profit expansion, the growing demand for high-quality care services, and the activation of private long-term care insurance, the use of non-covered services is expected to increase, along with a rising demand for the expansion of non-covered service offerings. Considering these market conditions, the finding that competition among providers significantly impacts the price of non-covered meal ingredients suggests that a more cautious approach is necessary when implementing policies aimed at promoting competition or regulating supply.